So, you've taken that job offer and now you have to move away from Canada. When this happens, it's not an easy decision but one that requires a lot of planning and preparation ahead of time.

What happens to your investment accounts when you emigrate from Canada?

Some assumptions-

1. You are officially out by the CRA definition (i.e.. no significant ties to Canada)

2. You aren't a US Citizen (more of them at a later date)

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Your RRSP

The mighty RRSP is a tax-deferred account that helped you pay less taxes when you contributed and grows without taxation. It's meant for your retirement but do you need to close it when you leave Canada?

Absolutely not.

You can continue to hold your RRSP account even as a non-resident ALTHOUGH you might run into restrictions on being able to manage it.

In many cases, as a Non-Resident you could be restricted to only sales in your accounts.

Certain advisors (cough, cough like me) can work with non-residents but if you had your RRSP at the local bank branch, you're probably stuck.

Now when you leave, you don't have to pay taxes on your RRSP. You are only ever taxed when you withdraw money from your RRSP so if you can avoid any withdrawals then you can leave it compounding tax-deferred until age 71.

What if you need some money though?

Withdrawals are taxable but I'm going to dive deeper on this specific point in a later thread because there is lots of nuance in this area around timing but also the place you have moved to from Canada.

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LIRAs and DC Pensions

I'm lumping these two together because they are nearly identical to RRSPs.

You can keep them both compounding for you over time just like the RRSP.

The DC pension you have through your Canadian employer is likely going to be forced to move into a LIRA account. The LIRA account grows tax-deferred until you withdraw.

The withdrawal rules around LIRAs are slightly different than with RRSPs and there are options available to unlock a LIRA and put the funds into a RRSP but those rules are beyond what we are discussing today.

Just know for you, the Canadian Emigrant, RRSP=DC Pension=LIRA when it comes to impact to your taxes as a non-Canadian.

You are only taxed on withdrawals.

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RIF and LIF accounts

This is for the older people. The RIF/LIF are just the graduate version of the RRSP/LIRA.

These are the accounts where you are now required to withdraw funds on an annual basis. The typical RIF/LIF account holder is already in retirement.

Because you get taxed on withdrawals from RRSPs and LIRAs, of course you will be taxed on withdrawals from for the graduate accounts.

When you, as a non-resident, ask for a withdrawal, there is a 25% withholding tax applied on your payment.

Two caveats to that:

1. Many countries have tax treaties with Canada that reduce the Withholding rate down to 15%

2. You probably were paying higher than 25% if you had stayed in Canada and withdrawn that amount here.

In some cases (like the United States) you will also get credit for this tax payment to Canada with your current country

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The mighty TFSA

Like the RRSP and LIRA, you can keep your TFSA going if you leave Canada but there are a bunch of things to be aware of.

Currently, the US does NOT recognize the TFSA as a tax-free account so if you move there you will have to file on your US income taxes every year for any income/interest/realized gains.

If you withdraw money from your TFSA, it's not taxed here in Canada which is nice.

What is also nice is that that amount you withdraw can be added back into the TFSA again at a later date but it pays to double check the rules specific to your country with your planning team.

Now the sad part, once you emigrate from Canada, you cannot make any further contributions to your TFSA.

IF you make contributions as a Non-resident, you will get a nasty 1% per month penalty assessed by CRA.

Make sure that before you leave you cancel any of your automated monthly contributions. I've seen this really trip up people who forget for multiple years and get a nasty tax bill once CRA does the math.

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RESP accounts

Again the RESP can continue as it was before but no new contributions can be added IF the child(ren) that are beneficiaries are also non-residents. This is pretty likely after all.

But what if your child is in University and needs the money to attend a school in their new country?

Well as a non-resident, they pay a withholding tax (25% or 15% with tax treaty) on the income and growth withdrawn for the Education Assistant Payment

If you withdraw the principal portion (aka- the money you originally contributed) there is no taxes owing.

The kicker is that the grant money the government gave to you must be returned back to the government.

Also- some countries don’t recognize the RESP as a tax-deferred account so you might also need to file every year for gains/income/interest on these accounts in your new country.

Again check with your wealth advisors.

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Your investment account.

Last one but this is the one that requires some planning work.

When you leave Canada, the CRA considers that you have disposed/sold everything and taxes you one final time. You don't actually have to sell anything, they just apply taxes like you did.

Now here is the good part, that value you had to claim as your disposition price in Canada? That often becomes your new cost or book value in your new country.

This helps avoid double taxation on your investment account down the line.

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For real this time- One last quick one, what if you have a FHSA?

Because it's so new, the FHSA is typically treated like the TFSA would be in outside countries.

That means that you could be taxed on income/gains inside your FHSA each year.

But the FHSA has a unique quirk that you can use to avoid this problem.

You can simply move the FHSA money into an RRSP account using the RC721 form available from the CRA or your investment firm. Doing this moves the money into an account that IS recognized for tax deferral and saves you some headaches in filing taxes with your new country.

Each of these areas can lead to a lot more in depth planning but if you have the basic understanding from the start, you will hopefully avoid careless mistakes and pay more income tax than you need to when moving away from Canada.

As always, make sure you consult an wealth advisor.

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